Good morning,
If equity markets could go more than a week without extraneous distractions from their core long-term value drivers—earnings and macroeconomics—we might better enjoy the benefits of a growing economy in a controlled inflation environment. It’s been just over a week of relatively clear air without much interruption (until yesterday), and the major equity indices have responded constructively so far this week.
The S&P 500, Nasdaq, Russell 2000, EAFE, and Emerging Markets are up +0.41%, +0.63%, +0.71%, +0.40%, and +0.54%, respectively—even including yesterday afternoon’s weakness.
That momentum was interrupted yesterday with news of a second full carrier strike group moving into proximity of Iran—a classic (and costly) escalation signal.
Futures this morning are mixed to slightly lower, with market attention focused more on developments in the Middle East than on the shutdown-delayed Q4 GDP release (which rose slightly less than expected) and this morning’s PCE data (which came in modestly better than expected).
The key question heading into the weekend is whether rising geopolitical tension will prompt the typical “risk-off” posture from investors ahead of two days of headline uncertainty.
Be well,
Mike